March 6 (Bloomberg) -- General Electric Co. and Siemens AG, the biggest makers of medical imaging machines, say President Barack Obama’s plan to slash spending on the use of MRIs and X- rays threatens patients, and they’ll lobby Congress to block it.

As employers, Fairfield, Connecticut-based GE and Siemens, of Munich, say they back Obama’s efforts to cut health costs. Still, in separate interviews, the companies pledged to fight a plan, proposed in the president’s budget last week, to require approvals from a private “benefit manager” before Medicare will pay for imaging. The White House said the measure would save $260 million over a decade, money that would aid Obama’s plan to expand health coverage.

The measure may hinder equipment sales that accounted for more than half of GE’s $17.4 billion in health-care sales last year, or about 5 percent of overall revenue. The imaging unit at Siemens generated 262 million euros ($328.7 million) in profit in the fiscal first quarter, a fifth of net income, the manufacturer reported Jan. 27.

Benefit managers will “actually hamper access and add administrative cost” to Medicare, said Mark Vachon, president of GE Healthcare’s Americas’ division, in a March 3 interview. “Having a system that gets between physicians and patients is probably not something we’d be supportive of.”

Obama’s budget has drawn fire from insurance companies and drugmakers, who have criticized the demand for more savings from both industries.

‘Hundred Million’ in Losses

Eli Lilly & Co. and AstraZeneca Plc said on Feb. 26 they would lose “several hundred million” dollars from Obama’s proposal to mandate deeper discounts for drugs they sell Medicaid, the health plan for the poor. Health-care stocks, led by Humana Inc., slid after the budget called for stripping insurers of $175 billion over 10 years by forcing them to compete for Medicare contracts.

If Congress approves, Obama’s plan would be the latest attempt to rein in Medicare imaging costs, which more than doubled to $14.1 billion from 2000 to 2006, according to a June 13 congressional report. It would put Medicare on par with most private insurers, who already require prior approvals.

Doctors are increasingly owners as well as users of scanning equipment, giving some an incentive for unneeded tests, the Government Accountability Office found in the report. Imaging use “varied substantially across geographic regions, suggesting that not all utilization was necessary or appropriate,” the GAO said.

‘This Time is Different’

Within hours of the budget’s release on Feb. 26, the Medical Imaging & Technology Alliance, the trade group representing both GE and Siemens, issued a statement warning that the plan would deny seniors “life-saving medical services.”

The White House didn’t immediately respond to a request seeking comment. In a health care forum organized by the White House yesterday, Obama told his audience he expected a fight.

“Our inability to reform health care in the past is just one example of how special interests have had their way and the public interest has fallen by the side,” Obama, a Democrat, said. Still, with support for reform from doctors and patients, unions and businesses weary of high labor costs, “this time is different,” he said.

Nonetheless, in documents prepared for a Dec. 4 investor meeting, GE said the industry was ramping up “advocacy” efforts to stave off restrictions on the use of imaging machines.

Eleanor Kerr, a Siemens lobbyist, said Medicare has already moved to cut imaging costs, ordering radiologists who conduct the tests be accredited by 2012. That step, along with medical societies’ push to update guidelines, should be tried before pushing benefit mangers on patients, she said.

Policing Themselves

“We feel that providers can police themselves through the development of appropriateness guidelines” with oversight from Medicare, said Kerr, Siemens’s director of government affairs-- health care.

Doctors ordered almost 600 million X-rays, magnetic resonance imaging tests, computed tomography scans and other procedures in 2006, according to the Reston, Virginia-based American College of Radiology. Medicare paid for a third of them. The tests use magnets, radiation, radio waves and other methods to peer at tumors, heart deformities and ills inside the body.

The radiologists’ group also opposes the White House plan, though it acknowledges a need to cut back on unneeded scans, said John Patti, a thoracic radiologist at Massachusetts General Hospital in Boston. The problem could better be handled with doctor training than employing benefit managers with a profit motive, he said in an interview.

Middlemen and Brokers

“Any time you put a middleman or a broker between physicians who are trying to care for their patients, you’re going to run the risk of impeding care,” said Patti, vice- chairman of the radiology college board of chancellors.

GE and Siemens have been hammered by investors over the past year as the recession and credit crisis eroded revenue.

GE jumped 40 cents, or 6 percent, to $7.06 in New York Stock Exchange composite trading at 4:15 p.m. It’s fallen 79 percent over the last 12 months. Siemens slipped 1.5 percent to 38.49 euros in Frankfurt trading and fell 54 percent in the past year.

Obama’s plan would mean fewer procedures and lost revenue for equipment makers led by GE, Siemens and Amsterdam-based Royal Philips Electronics NV, said Greg Freiherr, an editor at “Diagnostic Imaging,” an industry newsletter in San Francisco.

“The goal of the proposal is obviously to slow the growth in demand,” Freiherr, a former industry consultant, said in an interview. “And slowing the growth would translate into fewer sales for the equipment makers.”

Reimbursements for imaging were among Medicare’s fastest- growing expense from 2000 to 2006, according to last year’s GAO report. Increased use pushed up costs, as did the rising prices for the newest MRI or nuclear medicine scans. Cutting-edge units can sell for as much as $1.5 million, Freiherr said.

Managers Recommended

The GAO recommended Medicare follow private insurers, who turned to third-party radiology benefit managers as costs began rising in the 1980s and 1990s.

The managing services, led by units at Indianapolis insurer WellPoint Inc. and Magellan Health Services Inc. of Avon, Connecticut, cut growth in imaging costs to 5 percent a year from as much as 20 percent, the GAO said.

GE’s Vachon said Obama’s plan to spend $19 billion upgrading doctors’ computer systems will do more to cut unwarranted imaging, by ensuring physicians have access to new medical guidelines, he said.

Congressional leaders in Congress have yet to take a stand on the imaging plan, so it is too soon to say how it may fare, Siemens’s Kerr said.

Proven Success

The proof of benefits managers’ success is in their widespread adoption by private insurers, Bob LeGalia, president of Magellan’s radiology service, said in an interview.

At Magellan, decisions are made by professionals with medical degrees in consultation with patient doctors, not the “actuaries” cited in the Imaging Alliance’s statement, he said.

Magellan doesn’t reveal its rejection rate, said Michael Fleming, a spokesman. The tests denied are often duplicative, or those where medical guidelines call for one scan and a doctor has proposed a different one, LeGalia said. Tests avoided can protect patients from unnecessary radiation, he said.

“We all agree this technology is wonderful,” LeGalia said. “It’s not a bunch of accountants sitting around making decisions on medicine.”

To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net.

Last Updated: March 6, 2009 16:25 EST